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9.4 The Tasks of a Manager
We have seen how the role of a manager of a business will vary greatly according to his area of responsibility. We have also seen how the manager needs to help the organisation meet its objectives and that these can vary significantly from one organisation to another. The roles of different managers are therefore very different and the tasks which they undertake to perform their roles are also very different. Nevertheless we can classify these different tasks into one of several types according to their nature. These tasks can be classified as follows:
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103 9.4.1 Planning
A manager needs to plan for the future in order to decide how best to meet the objectives of the organisation. He needs to decide what can be achieved and what inputs are needed to help him meet his plan. Planning therefore needs to be not just qualitative but also quantitative in order to evaluate the plan and determine inputs and outputs to the plan. All business processes can be considered as taking a set of inputs and performing operations in order to add value and transform them into outputs. The function of any business can therefore considered to be adding value through the transformations made during its processing. This can be illustrated as follows:
Fig 9.2: The transformational process
Planning needs to consider alternatives, not just in terms of alternative targets to set but also in terms of alternative methods of achieving these targets. Planning cannot be done in isolation but needs to take into account what effect the planning has upon the plans of other managers within the organisation. This is especially true when the inputs of this plan come from the outputs of the plan of another manager or when these outputs affect the planning of another manager.
Thus a sales manager cannot plan how much to sell without taking into account the plan of the production manager concerning how much will be produced, and the production manager cannot make his plans for production without taking into account the planning of the sales manager regarding how much can be sold. The planning tasks of the manager therefore are important but cannot be made in isolation.
9.4.2 Control
Control is concerned with making sure that things happen in accordance with the plan. It therefore involves monitoring the plan, and progress being made in accordance with the plan. It also involves taking action when things are not going in accordance with the plan in order to attempt to change things so that the plan can be achieved. Control is therefore an ongoing activity for a manager and involves comparing actual performance with targets, providing feedback on actual performance and taking action to change performance when it diverges from the plan.
Although the manager may be able to achieve this by physical observation and communication with people, it is likely that this will not be sufficient. He will probably need to rely to a large extent upon reports in order to exercise control. The reports which management accounting provide are therefore crucial in assisting a manager to exercise control.
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9.4.3 Decision making
One of the key aspects of a manager’s job is concerned with making decisions. There is always more than one course of action which a manager can take in any particular situation (even if one of the courses is to do nothing!) and so he needs to decide between the alternatives in order to make the decision which is most beneficial. In order to make a decision the manager needs to identify the possible alternative courses of action open to him, to gather data about those course of action and to evaluate the consequences of each particular alternative. The stages in the decision making process are shown in the diagram below, which illustrates that the decision making process is not complete when an alternative has been selected and implemented but that the outcomes of the decision need to be followed through into the control process.
Fig 9.3: The Decision Making Process
In order to make a decision a manager needs information. Management accounting is one tool which exists to help the manager by providing information about the consequences of the alternatives open to him.
105 9.4.4 Performance evaluation
While the performance of organisations is evaluated by such measures as return on capital employed, the organisation in turn needs to evaluate the performance of its units and the managers running these units. The managers in turn need to evaluate the actual performance of their tasks against that which has been planned. In order to evaluate performance there needs to be acceptable measures of performance.
Measurement needs to be relative to be meaningful – to compare performance with plans and with past performance. Performance measures also need to be quantitative in order to enable comparisons to be made and financial information provides important data for the measurement of performance. Unless performance can be evaluated managers have no basis upon which to exercise control, to make decisions and to plan for the future.
9.4.5 Communication
Information available to help managers in their tasks needs to be communicated to them, and managers in turn need to communicate their plans and decisions to others. Communication involves both the sender of information and its recipient, and for the information to be of value it needs to be understood by the recipient as intended by the sender. Any interference which prevents the message being received by the recipient is known as noise and the diagram below shows that two types of noise prevent a message being received as transmitted.
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Fig 9.4: The Communication of Information
Technical noise is that such as occurs on a telephone or radio which is concerned with the technical means of communication. A more crucial type of noise however is semantic noise which occurs because a message is not transmitted in a clear and unambiguous manner and so is not correctly understood by the recipient. Quantitative information is less likely to be misunderstood than qualitative information and this is one of the importance features of accounting information. Management accounting therefore has an important part to play not just in enabling decisions to be made but also in the communication of this information.